The Day Ahead: Clamoring for the Truth

From machines scalping fractions of a penny to the slick-haired 55-year-old smoking veteran brokers, the global pool of those seeking wealth are being reminded that the market will often see through the fluff and focus on truth. But, at the moment, the truth is anything but visible, as there is no fiscal-cliff deal, and talk of an impending agreement continues to constitute pure speculation based on facial expansions and publicly held pow-wows. (Note that, ideally, the next step is to have a prominent person on either side of the aisle signal that an endgame is in sight).

So what do we have to go on? Here is a tidy list of hypotheticals on which the market is acting, which all assume a fiscal cliff deal will be announced around Christmas:

1. Market sentiment will firms further.

2. Firming market sentiment will cause a flight from "havens," either Treasuries or corporates.

3. As fourth-quarter earnings commences, we'll receive better forward-looking commentary on initial sales and earnings guidance for the first half of 2013, as well as details on improved internal discussions on new orders among. The market will interpret the latter as an indication of unrealized earnings power (which has been clouded by cliff scare).

4. Firming market sentiment, and a different earnings season vs. what we saw in the third quarter, will begin to feed in to survey and macroeconomic data; for example, the dreadful recent read on Michigan consumer sentiment turns into a cycle bottom. Along with those happy tidings, market sentiment is only enhanced, luring in the suckers -- oops -- investors.

5. Any conflicting data in support of the rally will be completely ignored or explained away by using the investment-banking gibberish, "Can't fight the Fed; they are a backstop."

Weeee-hawwww. Am I ahead of myself by cultivating this virtuous circle of amazingness that makes everyone significantly wealthy on paper? After all, from 1950 to 2011 the S&P 500 has risen in 47 Decembers compared with declines in 15 of them, so clearly we have to jump aboard the seasonal train -- which happens to be hosting Mr. Irrelevant on central fiscal issues. Moreover, we are now witnessing the following.

● The S&P 500, the financial sector and emerging-market indices are each above their 50-day moving averages. (Dig that move in Wells Fargo (WFC)? I hope you are following me on Twitter, as I pointed it out there Monday.)

● Consumer discretionary stocks are generally in technical no man's land. They're between the 10-day and 50-day moving averages, with downtrend still in place, but optimism sprouting. This is counterintuitive to evidence of a slowdown in retail spending for the holidays, as well as to the high probability that the payroll tax credit will expire.

● The iShares Dow Jones Transportation Average (IYT) is simply rocking. To heck with FedEx's (FDX) core profitability getting impacted by changing business dynamics. The economy is alive, baby!

Amidst the litany of this pump-type news, are there are reasons to dump the short-term gains or wait on the sidelines any longer? You bet there are. Although I converse with Mr. Market daily, I prefer to fight him a bit by not suggesting new longer-term positions -- and snatch some off the table if you are being a "speculator," as Ben Graham eloquently coined it.

Before I put my stamp on anything, to quote a chant from WWE wrestler Ryback, "Feed me more" --details, that is. Where is the caution stemming from? Well, for example, General Electric (GE) lowered its fiscal-year revenue guidance, and the stock was hit with a sell stick to the neck. That tells me that, for a host of globally exposed entities, business conditions weakened from the lackluster third quarter. It also says the pace of recovery after fiscal-cliff resolution will be methodical -- no, there won't be an elated rush of orders. There will be measured optimism on the part of executives.

Unfortunately, the market could care less, a lesson could indeed be beaten into its body as we flip the page to 2013.